All Forum Posts by: Joshua Thompson

Hey guys I fixed and flipped a house and made a profit. Are there any documents I should be gathering from the closing company and filing on my tax return? Or do I just report the amount of profit?

@Philip C.

Four very different issues are at play here. Which is why RE taxation is so confusing for y'all and so profitable for us accountants. :)

Warning: I'm taking some liberties with the terminology, for the sake of clarity.

1. Active business v. Passive renting/landlording. This issue is about which schedule to use (Sch C or Sch E) and whether the income is subject to the self-employment tax, aka Social Security and Medicare tax. The answer for a rental property in 99% of the cases is the latter: passive renting and no SE tax.

2. Trade or Business v. Investment activity. This issue is about deductibility of general business expenses and the new 20% deduction on net income. The answer for a rental property in 99% of the cases is the former: Trade or Business, meaning all deductions are available.

3. Active participation in the activity. This issue is about your ability to deduct your rental losses, including depreciation, against your "normal" income, such as W2 salary. The answer is probably yes in your case, but I would need more information.

4. Passive activity v. Non-passive activity, aka Real Estate Professional status. This issue is about your ability to immediately deduct all your rental losses, regardless of your income level. The answer requires additional information from you, but it is probably the former: Passive activity, meaning that deductions for your losses can be limited if either your losses are too high or your income is too high.

Finally, on the appliances - yes, you can depreciate or even write them off completely the current value of the appliances. The key is: current value, not their original price paid by the previous owner.

Hello Resident Tax Gurus! 

I just started an S Corp and I'm the only employee.  I am interested in taking a training course.  Do I pay for this course directly from my S Corp account OR do I pay for it myself and expense it to the business?

Need real estate tax planning services in the Dallas Texas area

I had many experiences similar to that mentioned above when we "inherit" a client from another accountant. In most cases, these are accountants not specializing in real estate, though. 

Can't speak for others, but I personally would appreciate if a colleague of mine ever catches an error in the work of my firm and brings it to my attention. As @Linda Weygant said, nobody is infallible. I hope I'm close, though :)

Some of the red flags? OMG, a long list, @Joshua Thompson.

• Schedules C with zero income and large expenses, particularly interest, taxes, and repairs
• Flips reported at gross profit instead of full selling price minus cost of goods sold
• Flips reported as short-term capital transactions on Schedule D
• Schedules E with zero income and large expenses
• Schedules E with repairs several times higher than the rent
• Missing depreciation
• Losses from rental properties or K1s not showing up on 1040 (not always a mistake, but often is)
• All expenses grouped into some $40,000 "miscellaneous business expenses"
• Missing deduction for use of a business vehicle

there are another 20-30 very common errors and oversights, soon to include the missing 20% QBI deduction.